CH9 Additional Questions Revised PDF

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Chapter 9 Additional Practice Questions to practice and prepare for the test....

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Chapter 9 Additional Questions 1. Many people believe that location is the most important factor to consider when selecting a home. 2. Despite the restricted lifestyle, there are multiple financial benefits to renting. 3. The purpose of a rate cap in an adjustable rate mortgage is to limit the amount the interest rate can change at a given time (typically annually and for the life of the loan). 4. A $500,000 mortgage on a new house with 1 point costs $5,000. This amount is fully deductible on Schedule A. 5. “PITI” does not include HOA fees. 6. A common financial risk of home ownership is that: A. interest rates may change with a conventional mortgage. B. property values may decrease. C. mortgage interest is not tax deductible. D. only a portion of real estate taxes are tax deductible. 7. The amount of mortgage a person is eligible for would be increased by: A. higher interest rates. B. a lower down payment. C. high debt obligations. D. a low family income. E. lower interest rates. 8. Calculate the payment on a 30-year, $575,000 mortgage at 6%: A. $3,275.46 B. $3,447.42 C. $3,273.56 D. $20,687.88 9. You intend to purchase a house valued at $575,000. You plan to make a 15% down payment and take out a 30 year mortgage on the remaining balance. If the mortgage has a 6% rate, what will be the monthly payment: A. $2,930.30 B. $3,275.46 C. $3,447.42 D. $3,102.67 10. Which of the following would increase the speed of equity growth for a homebuyer? A. making a down payment of 10 percent instead of 20 percent B. obtaining a mortgage interest rate of 9 percent instead of 8 percent C. obtaining a 15-year mortgage instead of a 30-year mortgage D. making larger deposits to the escrow account

Chapter 9 Additional Questions 11. Todd Foley is applying for a $100,000 mortgage. He can get a $800 monthly payment for principal and interest and no points, or a $700 monthly payment with 3 points? How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly payment? A. 6 B. 10 C. 18 D. 30 E. 48 12. A renter is required to pay a security deposit of $800, on which 4 percent interest will be paid. What amount would the person earn each year? A. $100 B. $64 C. $32 D. $16 E. $4

13. If closing costs of $1,400 are associated with the refinance of a mortgage that would reduce the monthly payment from $980 to $870 refinance, it would take approximately ____ months to cover these costs. A. 6 B. 9 C. 13 D. 17 E. 22 14. A bank advertises a 30 year $200,000 fixed rate mortgage at a 4.50% rate. If the bank charges fees of $650, what is the APR? A. 4.47% APR B. 4.50% APR C. 4.53% APR D. 4.62% APR E. There is not enough information to answer the question. 15. Assume the following mortgage: Amount borrowed = $200,000, Annual interest rate = 6%, Term = 15 years. What is the monthly payment and how much of the payments in year 4 goes toward principal? A. Payment: $687.71; Principal: $1,899.28 B. Payment: $1,687.71; Principal: $10,151.79 C. Payment: $13,872.87; Principal: $190,025.84 D. Payment: $1,687.71; Principal: $8,483.34

Chapter 9 Additional Questions

16. A buyer has a principal and interest (PMT) payment of $1,300/month, annual taxes of $6,000, homeowner’s insurance of $85/month, utilities of $200/month, and a lawn service of $25/month. What is the PITI? A. $1,300 B. $1,885 C. $2,085 D. $2,110 17. A buyer is considering a house with a PITI of $3,000/month, what must his/her annual income be to qualify if the lender uses a housing expense ratio of 28%? A. $10,714.29 B. $95,000 C. $128,571.43 D. There is insufficient information to answer question

18. A buyer is considering a house with a PITI of $2,500/month. The buyer has credit card payments of $200/month, student loans of $150/month, car payments of $300/month, and a cell phone bill of $50/month. What must his/her annual income be in order to qualify for a loan with a total debt ratio of 43%? A. $79,534.88 B. $83,720.93 C. $87,906.98 D. $89,302.33 19. If a buyer has a gross monthly income of $8,000, student loans of $200/month, and car payments of $225/month, what is the maximum monthly PITI loan he or she could get if the lender has set a total debt ratio of 38%? A. $2,615 B. $2,815 C. $2,840 D. $3,040

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Chapter 9 Additional Questions

1. TRUE 2. TRUE 3. TRUE 4. TRUE 5. TRUE 6. B 7. E 8. B 9. A 10. C 11. D 12. C 13. C 14. C 15. B 16. B ($1,300 + $500 taxes + $85 insurance) 17. C ($3,000/.28 times 12 months) 18. C ($3,150 of debt payments excluding cell phone divided by .43 times 12 months) 19. A ($8,000 x 38% minus $200 and $225)...